Course

Asymmetric Information

Instructor: Tyler Cowen, George Mason University

Asymmetric Information : When one party has more or better information about the good or service being exchanged than the other party. This is from the video “

Asymmetric Information: When one party has more or better information about the good or service being exchanged than the other party. This is from the video “Asymmetric Information in Health Insurance” in the Principles of Microeconomics course.

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Transcript

Suppose that potential health insurance consumers come in a range of states of health. For instance, the least healthy people might cost about $30,000 a year. That's these folks here. The most healthy might cost nothing in healthcare. That's these folks over here. Now consumers know this information, but by assumption, insurers don't. From the insurer point of view, everyone is of the same average health.


Here again, we have asymmetric information. That is consumers of healthcare have more information about their health status than insurers do.

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